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Job Impacts – what are they all about anyway?

Posted by on in Economic Impacts
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“Can’t live without them, and we can’t get enough of them” has been a constant public sector mantra since the call to action in early 2009 through the federal stimulus known as ARRA (American Reinvestment & Recovery Act). The need for validation and evaluation in turning public monies into job retaining/creating activities actually predates the ARRA era and should be a perennial question for any civic leader interested in maintaining or improving the well-being of its working-age residents – through income generation - and the businesses that pay taxes.

How do we “impact a job” anyway? If you understand this then you will understand that targeting $1 into project A or project B may have very different implications. First there are temporal mechanisms that describe a project – will it be a short-term activity (e.g. building a ….school, a bridge, an energy-efficient manufacturing plant) that once construction is completed the boom goes bust? Or is there more of a story to examine and tell? Is there a long-term change conferred by completed project (e.g. improved human capital as a result of the educational facility, better access and hence productivity to the vehicles that use the bridge, or improved cost-containment (hence pricing) for the manufacturer)?

The short-term construction episode can impact “local” jobs to the extent that you exhaust the majority of your materials and labor budgets from “local” firms and working-age households. You can’t simply assume your region is large enough or diverse enough with respect to business mix to fill those requirements locally –you need to know something about what’s being purchased and where does it come from. You might also need to know how much more it costs to invest in a new technology version in contrast to the standard technology offering and the potential for displacing workers assuming they can’t be re-trained in a re-tooled facility.

The longer-term story (if one exists) would require knowing who spent how much (‘who’ as in the household sector and/or which types of industries, institutions) and on what to eventually get what amount of benefit, and are there others tangentially incurring a benefit- a cost but not part of the initial set of economic agents encompassed by the project? The longer-term story that involves projects improvements that alter cost and pricing fundamentals of that local economy will also require an analysis framework beyond a simple application of an input-output model (also referred to as ‘multiplier models’).

Second –the above shouldn’t be confused with a separate issue of distinguishing a job” that is directly linked to exhausting a project budget” or one “that is in the sector receiving a productivity benefit from the completed project” in contrast to that job “plus its associated multiplier effects”. That is a separate exercise.

Third (and last) – presumably specific types of projects are defined in desired settings to remedy some need (e.g. persistently high energy costs, congested peak travel corridors, poor educational capacity). The analysis of how a project will exert its effect on that economy should be conducted in an analysis context that depicts those local economic conditions – not those of a larger region which will hinder efforts to measure impacts properly, and dilute the story of benefits/disbenefits.

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Guest Tuesday, 25 April 2017